Zendesk Raises Prices, Pisses Off Customers

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We’re all for startups trying to make money, but we also recognize a good old ‘bait and switch’ tactic when we see one. Case in point: on-demand help desk software maker Zendesk, which has just emailed its customers to let them know they’re raising their prices – resulting in a 300+ percent increase in monthly fees for some.

The announcement, which was also posted on the company’s forums, comes in the form of an introduction of new product features, with the new pricing scheme mentioned underneath (never a good sign).

The startup claims the new pricing plans are being offered in response to “customer requests for different packaging and features”. But judging from the commentary on the forum entry and onTwitter, we’re not so sure that’s really the case.

For what it’s worth, Zendesk is trying to appease outraged customers with ‘grandfathering terms’, but that forces many to switch to annual billing rather than monthly or quarterly, which a lot of them appear unwilling to do. Besides, it’s not a long-term solution.

Some of the reactions on the forum post speak volumes about how Zendesk customers feel about the changes:

We pay $99 for 5 users, now its 5 x 59 = $295 per month.. This cannot be for real, we have been supporting zendesk since the early days, how can this be justified…If I pulled a stunt like this on my clients I am sure we would lose..Especially as the option to stay on your current price range involved stumping up a years fees.. come on guys, give us a fair go, this is outrageous!!!!

I’m with David, our account is going from $153 per month (9 agents) to $261 per month, a 58% increase. Using a huge price increase to force people into an annual billing plan is going to leave a bitter taste in a lot of mouths.

We currently have 41 agents and would have been up to 50 by mid-June. Not anymore. Our monthly bill is going to increase from $1503 to $2419. That is an annual increase of approx $11,000. A roughly %62 increase.

This seems extortionate, we are facing a 100%+ increase ,what are you playing at Zen Desk?

I’ve also managed to find someone who was actually happy with the transparency Zendesk displayed in its email to customers, so maybe we’re just hearing the voices of the angry here.

Again, it’s fine for startups to make money, even if it means they need to change their pricing plans and hike fees at some point. But in this case, perhaps Zendesk would have been better off checking exactly how profoundly these changes would affect the bills of their early customers.

How can you explain a price increase of more than 300% for a service that you’re far from the only one to provide? Zendesk doesn’t even really do that, they’ve just communicated the new fees and keep pointing customer who complain to the grandfathering terms, which do not explain the rationale behind the price hikes either.

We’ve contacted Zendesk CEO Mikkel Svane for more insight and hope to hear back soon.

UPDATE: Svane responded to us with this statement:

Yes, we are raising our prices on two of our plans. We now have three plans at three different price points (starting at $9). This is the first time EVER that we have increased pricing. But we have added new functionality to the service for every week for the last two and a half years.

And today we’re launching a lot more functionality for knowledge base and community support. Zendesk has gone from a traditional ticket management system to a complete customer engagement platform, supporting 1-to-1, 1-to-many and many-to-many customer conversations and support interactions. Zendesk is investing heavily in new features and our customers will continue to experience great things with Zendesk.

We will deliver on our promise. Are we the cheapest show in town? No. But we do think that we have an excellent offering for almost every budget starting at $9 per agent seat. And we do offer to grandfather our existing customers for one additional year at their current price point with all of their current functionality grandfathered indefinitely.

The price per agent has gone up with $10 and $20 on the Regular and Plus+ plans respectively. That’s a 50% increase. Some customers may experience disproportional price hikes due to earlier introductory discounts, and we will look into these accounts on a case-by-case basis.

Let me finally point out, that we have been completely open and transparent about the price changes. We don’t try to sneak it in.